In the nearly $2 billion effort to replace the fleet of short-haul trucks at the San Pedro Bay port complex, it will be cargo owners not motor carriers who will subsidize the majority of the cost of the new rigs, port officials decided last week.
Trucking companies were pleased to sidestep the tax, but shippers of low-value stuff such as Southern California’s scrap paper and agriculture exporters could be decimated by the port initiative.
Both the Los Angeles and Long Beach harbor commissions last week approved a $35 fee that will be assessed on each loaded 20-foot cargo container. Forty-foot containers will be charged a $70 fee each time they enter or leave a port terminal via truck.
The money raised by the fee would help pay for thousands of new, more environmentally friendly trucks that will replace old, smoke-belching trucks.
The ports say this fee will have a negligible impact on retail prices, citing a study by economist John Husing that estimated the average value of goods in each cargo container is roughly $70,000.
But sectors that deal in low-value commodities will bear a much greater burden as a result of the new tax.
“We think the fee is excessive and unfair; we think they need to charge a percentage of the cargo value,” said Stephen Young, president of Baldwin Park-based paper exporter Allan Co. “Sooner or later they’re going to discourage the business.”
Young said the average value of the commodities in each 40-foot container his company exports is just $2,200, making the new cargo fee more than 3 percent of the value of each shipment.
The national scrap paper industry sees, on average, an after-tax profit of about 4 percent.
Allan Co., one of the most prolific exporters in the entire country, sent almost 100,000 containers out of the Los Angeles and Long Beach port in 2006. The scrap paper is sent to countries such as China, where it is turned into packaging material.
Paper is not the only industry that expects to suffer.
Brian McGuire of the Agriculture Transportation Coalition said at last week’s meeting that the new fee can be as much as a 10 percent tax on agriculture exports. This could have a profound impact on the industry, he said, because about 40 percent of all cotton exports move through the Los Angeles and Long Beach ports.
“Any kind of per-container fee has a greater definite impact on an (agriculture) export,” he said.
What’s more, there are several additional fees currently in place or being considered that could compound the costs for cargo owners. State Sen. Alan Lowenthal, D-Long Beach, is trying to get the state to approve a $60 cargo tax for transportation projects, while the ports themselves have said they may consider an additional fee to fund infrastructure improvements.
But the ports have pushed ahead with this latest cargo fee because it would be difficult, if not impossible, to work out a fee structure that pleases everyone, said Richard Steinke, executive director of the Port of Long Beach.
“We recognize that there are some sensitivities in the market but what we want to do is keep the fee at $35,” he said. “Overall we recognize that not everybody’s going to endorse the fee but the fact is we’ve got to move toward clean air.”
Port officials and political leaders have said repeatedly that the ports cannot expand unless it does so in an environmentally friendly manner.
“Those who benefit from goods movement should be paying the cost,” said Long Beach Mayor Bob Foster at last week’s meeting. “For years, the residents of Long Beach, up and down the 710, have been subsidizing the goods movement with their health.”
Port-related emissions account for roughly a quarter of Southern California’s air pollution, which experts say increases health problems like asthma and lung cancer. The truck program the first portion of the ports’ jointly-adopted Clean Air Action Plan would reduce diesel truck emissions by 80 percent, the ports say, by putting rigs on the road that meet 2007 emissions standards.
Last month, the ports adopted a timeline for the phased ban of older trucks that will begin in October by restricting all pre-1989 trucks from entering the terminals.
This new cargo fee, which will remain in place until 2012, will generate about $1.6 billion for the replacement program.
Many motor carriers, meanwhile, are quietly applauding this latest move.
“We’re happy that the fee is not being charged to us because we don’t want to be a banking system here,” said one trucking industry executive who asked to remain anonymous to avoid damaging relationships with clients.
This latest move by the ports came as somewhat of a surprise to some, as the ports had not given details regarding who would be assessed a fee or when. The trucking industry maintained that it could not afford to pay the fee and it should be the responsibility of those who own the cargo.
But a number of motor carriers and retailers have said the plan is incomplete. The fee would be assessed to all containers, regardless of whether they are being transported by a clean or dirty truck, which provides no incentive for companies to convert to new trucks any earlier than they have to.
“I’ve always said the higher the fee the better because it will entice people to convert to cleaner trucks quicker, but there’s no provision for the guys that have the clean trucks to have their loads not be charged,” said Fred Johring, president of Golden State Logistics, a Rancho Dominguez motor carrier.
Long Beach Commissioner James Hankla said the board has yet to finalize the plan and may provide incentives for companies to convert their fleets early.
“We will have to come up with some program that will recognize those who serve the ports with clean trucks with a rebate of some sort that will be sufficient to the needs of the program,” he said. “There will be many details to be filled in.”
